Latvia and Lithuania are following the lead of their Baltic neighbor Estonia to tighten the regulatory regime for the crypto industry, especially when it comes to prevention of money laundering and illegal funneling of funds.
The move reflects concerns of the governments in Vilnius and Riga about an influx of shady crypto businesses fleeing Estonia after the regulatory clampdown in Marsh.
In March, following the Russian invasion of Ukraine and the fears that Russian taycoons and business can use crypto to avoid the western sanctions, Estonia adopted a tougher anti- money- laundering regulations focused especially on the crypto industry.
The fears that crypto currencies can be used for funneling suspicious funds for clients based in Russia were echoed by the president of the European Central Bank (ECB) Christine Lagarde, who back in March said that crypto service providers may be an accomplice to circumventing sanctions against Russia in the wake if the invasion of Ukraine.
“We have taken steps to clearly signal to all those who are exchanging transacting offering services in relation to crypto assets,” Lagarde said at the Bank for International Settlements’ Innovation Summit, adding that they are basically “accomplices” to all trying to circumvent sanctions. “So is it a threat? Yes. Has it … been a threat in the past? Yes, because when you look at a lot of the dubious transactions that are taking place, a lot of the criminal activities payments that are taking place, very often you find some crypto assets.”
The lax crypto licensing regime that was in place in Estonia since 2017 enable hundreds if not thousands of opaque companies to get an Estonian license and operate from anywhere around the globe.
As a result Estonia acquired a reputation for a safe heaven for the fast growing crypto industry sector, as well as for a number of shady companies, bearing all the hallmarks of a scam. Those were mainly payment providers who in practice laundered the proceeds of unregulated brokers, registered offshore in places like St. Vincent and the Grenadines, the Marshall Islands or the Dominican Republic.
Lithuania’s finance minister, Gintarė Skaistė has proposed capital requirements in the amount of 125 000 EUR and new transparency measures for all crypto businesses operating in the country. Crypto companies will also have to hire a local manager as well. The new measures are expected to come into force in November.
For comparison the new regulations in Estonia envision that companies providing digital wallets and online exchange will have to hold at least 100 000 EUR as a minimum capital, while companies that hold and transfer crypto currencies for other people will have to hold at least 250 000 EUR.
In addition all applicants will have to pay considerable registration fees, and will be subject to strict due diligence duties and tangible regulatory scrutiny.
The number of crypto businesses registered in Lithuania has jumped to 252 from juts 20 in 2019.
Source
I have little doubt that the war in Ukraine and the sactions against Russia also played a role in this decision.
The move reflects concerns of the governments in Vilnius and Riga about an influx of shady crypto businesses fleeing Estonia after the regulatory clampdown in Marsh.
In March, following the Russian invasion of Ukraine and the fears that Russian taycoons and business can use crypto to avoid the western sanctions, Estonia adopted a tougher anti- money- laundering regulations focused especially on the crypto industry.
The fears that crypto currencies can be used for funneling suspicious funds for clients based in Russia were echoed by the president of the European Central Bank (ECB) Christine Lagarde, who back in March said that crypto service providers may be an accomplice to circumventing sanctions against Russia in the wake if the invasion of Ukraine.
“We have taken steps to clearly signal to all those who are exchanging transacting offering services in relation to crypto assets,” Lagarde said at the Bank for International Settlements’ Innovation Summit, adding that they are basically “accomplices” to all trying to circumvent sanctions. “So is it a threat? Yes. Has it … been a threat in the past? Yes, because when you look at a lot of the dubious transactions that are taking place, a lot of the criminal activities payments that are taking place, very often you find some crypto assets.”
The lax crypto licensing regime that was in place in Estonia since 2017 enable hundreds if not thousands of opaque companies to get an Estonian license and operate from anywhere around the globe.
As a result Estonia acquired a reputation for a safe heaven for the fast growing crypto industry sector, as well as for a number of shady companies, bearing all the hallmarks of a scam. Those were mainly payment providers who in practice laundered the proceeds of unregulated brokers, registered offshore in places like St. Vincent and the Grenadines, the Marshall Islands or the Dominican Republic.
Lithuania’s finance minister, Gintarė Skaistė has proposed capital requirements in the amount of 125 000 EUR and new transparency measures for all crypto businesses operating in the country. Crypto companies will also have to hire a local manager as well. The new measures are expected to come into force in November.
For comparison the new regulations in Estonia envision that companies providing digital wallets and online exchange will have to hold at least 100 000 EUR as a minimum capital, while companies that hold and transfer crypto currencies for other people will have to hold at least 250 000 EUR.
In addition all applicants will have to pay considerable registration fees, and will be subject to strict due diligence duties and tangible regulatory scrutiny.
The number of crypto businesses registered in Lithuania has jumped to 252 from juts 20 in 2019.
Source
I have little doubt that the war in Ukraine and the sactions against Russia also played a role in this decision.